Among all Vanguard DC plans using auto enrollment in 2009, the average participation rate was 86%, where plans using voluntary enrollment had an average participation rate of 59%, Vanguard said in a Web site article about its auto plan design, One Step.
If not implemented carefully, Vanguard said an auto pan design may produce unintended consequences for plan sponsors such as creating a large pool of low savers.
“Although automatic enrollment is an important tool for boosting participation, it may not get participants on track to a financially secure retirement if their deferral rates remain low,” said Ellen Kranick, manager of the Vanguard auto plan program. “Full autopilot plans help resolve that issue by gradually increasing deferral rates.”
According to Vanguard, plan sponsors also can benefit from an auto plan design through:
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